A selection of weekly articles by top Bahamian commentators.

January 08, 2014

Lasting Legacies for the Bahamas from the Year 2013

by Larry Smith

Over the holidays I had the pleasure of editing the English version of an article written by an Italian journalist and longtime friend. That article reviewed the legacy of 2013 for the international community.

"It was a year full of events - wars, rising social inequality, unchecked finance, the decline of political institutions, and erosion of global governance,” Roberto Savio wrote, "But some events have a deeper, long-lasting impact. And here we present them briefly, as a list to remember and watch.”

For Savio (who founded the Inter Press Service global news agency in the 1960s and was once international press chief for Italian prime minister Aldo Moro, well before Moro was assassinated in 1978), these keystone events included the collapse of the Arab Spring uprisings, the growth of Chinese nationalism, the election of Pope Francis, the failure to reach a global agreement on climate change, and the relative decline of both the European Union and the United States.

So I began to think about what legacies the year 2013 has left for Bahamians in terms of developments that would have a deep and long-lasting impact. My choices are presented here, although they are not in any order of magnitude, which is always a subjective decision.

1. Collapse of the initiative to regularise web shops.The Numbers racket has been a popular pastime for Bahamians since the 19th century (the first law to ban it was passed in 1901), and web shops offering electronic gambling began proliferating in the early 2000’s. In recent decades this illegal racket has developed into a hugely profitable and sophisticated business - and the racketeers are sought-after financiers of political parties.

With the government desperate for more revenue, and with the racketeers looking for ways to invest their ever-growing profits, an effort was launched to regularise and tax these ubiquitous gaming houses - and/or to create a national lottery. The effort was launched by the previous government and continued by the present administration. A referendum to provide political cover in the face of religious opposition was expected to easily pass, but lack of transparency and an incompetent process led to a dramatically low turnout and a resulting ‘no' vote.

This put the government in a pickle, because the impact of dismantling such a lucrative and pervasive structure as the web shops had become carried with it a risk of economic destabilisation. And clearly, there is a great public interest motive for regularising and taxing the gaming industry here. It is a fact of life that cannot be prohibited, and would be an easy way to generate funds for good works in education, sports and culture.

Legal manoeuvring following the vote has postponed the policy crunch, and government spokesmen continue to suggest that regularisation is not off the table. However, no efforts to challenge the bizarre gambling status quo in the Bahamas have gone anywhere over the past 50 years.

Casinos remain legal but Bahamians cannot use them legally, while the Numbers racket is illegal but patronized by most Bahamians without any consequence whatsoever. Meanwhile, it has been said that the government could gain an extra $40 million a year in revenue from a legal lottery - money which today presumably goes into the pockets of a handful of racketeers and politicians.

2. The impact of gang warfare.Last year 120 murders were recorded, compared to 111 in 2012 (and despite official efforts to fudge the figures). The year ended with two drive-by massacres - in Fox Hill and Bain Town - where ordinary people were sprayed with machine gun fire by thugs in a passing car. A total of 18 were shot in those incidents and five died. Since then several more murders have taken place, prompting police to admit publicly that they are very worried.

For Nassau, those 2013 figures produced a murder rate of 50 per 100,000 - roughly comparable to Detroit, which had 54 homicides per 100,000 last year in a population of 701,000. And Detroit is the city with the highest murder rate in the United States.

But it’s not just the number of killings that is worrying. As one commentator has noted, "It is also the types of crimes and the galloping brazenness of criminals: Multiple and cavalier killings in a single incident, the robbery of the acting prime minister, assaults on tourists and diplomatic personnel, among others."

This escalating violence recently moved the prime minister to make the following observation: "We cannot have a wild west mentality in this country where, with impunity, young men can ride around in cars and shoot people down.” Unfortunately, that is exactly what we DO have. Rackets and gang wars, aided and abetted by an ineffective judicial system and, by many accounts, political connivance. This is not street crime in the normal sense of the term, this is a slow-motion and very dangerous breakdown of society.

And the governmental response has been less than sterling. Last year, the security minister blamed the previous government for failing to address "the violence that has put the country in a state of war...as gang members destroy themselves and others.” His predecessor said much the same thing during his term in office.

In Jamaica and Haiti criminals groups have become part of the political system. They have established alliances with party members and sectors of the state, which in turn transfer resources to local generals, helping the government maintain political control in garrisoned areas.

People who work in the field offer credible stories that we are going down a similar road - where gangs have arsenals that rival police firepower, operate with impunity due to political connivance, and account for most homicides in the country. For an economy that relies primarily on tourism, that is a dangerous road to take.

More than two years ago Perry Christie acknowledged that the Bahamas faced a “major crisis”, and poor governance was only making crime worse. And just a few months ago, former gang leader Carlos Reid said we were “at a point where (gang warfare) will have a drastic impact on our economy.”

5. Major infrastructural development.For a country that prides itself on inertia, the infrastructure work credited to Hubert Ingraham’s final term in office was impressive by any measure. Over 125 miles of water pipes were laid in New Providence and the barging of fresh water from Andros was finally ended by the expansion of reverse osmosis plants. A multi-million-dollar project to plug massive leaks by replacing thousands of water mains on New Providence was also undertaken.

With most of the country’s population living on New Providence, and most of the island's workforce relying on private automobiles, the $200 million roads improvement project brought significant relief to commuters by virtually ending the island’s traffic gridlock, though at a cost of much public angst during the construction phase.

Over nine miles of new roads were built and more than four miles refurbished, along with accompanying drainage and water supply installation. Traffic congestion impacts heavily on the attractiveness of New Providence as a tourist destination, as well as on the cost of moving goods within the economy, so the benefits of this investment will be felt for years to come.

The development of a new seaport for Nassau had been contemplated by successive governments for the past 50 years without any movement. And this was despite the need to find space for expanded cargo throughput and to move congested freight facilities out of downtown. A deal was cut with shipping companies to build an $83 million port at Arawak Cay that is now 60 per cent owned by the government and the public. The port will be able to accommodate Nassau’s marine trade for the next half century.

The $409 million renovation and expansion of Lynden Pindling Airport on New Providence began in mid-2009 and was completed last year. This major redevelopment updated the airport to world-class standards and expanded terminal capacity to more than half a million square feet. The airport handled just over three million passengers in 2008 and will now be able to process more than five million a year, with facilities for the largest airliners.

These are all revolutionary improvements that were critical to future economic development and prosperity.

6. Launch of radical tax reform.We have all contributed in one way or another to the fiscal mess we are in - by evading taxes, by demanding benefits, by voting for unrealistic political platforms, by conceding to outrageous union demands, by providing jobs for the boys, by tolerating education failures, by being unproductive, and on and on.

The big picture to all this is that the government collects about 18 per cent of our gross domestic product in revenue and spends about 21 per cent. And in the early 1990s, revenue was even less - about 16 per cent of GDP. This has led to widening fiscal deficits that are covered by more and more government borrowing.

The total output of our economy is pegged at about $8 billion, and we have already racked up almost $5 billion in public debt. Experts say the country needs revenue of at least 20 per cent of GDP to cover administration, and insufficient tax revenues will ultimately impact our economic stability. In short, we must close a revenue gap of $500 million annually - some $200 million of which will come from value-added tax, the government says.

There is, of course, another side to the revenue coin, and that is spending. It is true that the Bahamas is a relatively low-tax jurisdiction, and there is certainly a case for more government revenue and a modernised tax system. But simply talking about tighter spending controls is not enough to offset allegations of large-scale fiscal irresponsibility. And where is the evidence of the government's commitment to fiscal restraint and accountability?

An IMF-supervised structural adjustment programme here is hovering on the horizon and would be politically unpalatable to say the least, and tough on everyone. Elements of such a programme could include devaluation of the Bahamian dollar, significant public sector cuts and economy-wide wage restraint in return for emergency financing.

7. No progress on energy reform.There has been bipartisan failure to create a new energy model for the country. The path to that model has been outlined over the past two administrations. It calls for changes to the Electricity Act (which dates to the 1950s), a modern Renewable Energy Act to provide a framework for alternative energy production, and a new management regime (including a waste-to-energy plant) at the environmental disaster we know as the Harrold Road landfill.

Talks with local and foreign investors have been ongoing for years across successive administrations with no concrete result so far. It is government in the darkness. Energy is one of the most far-reaching problems we have. It touches on almost every aspect of the economy, and our quality of life and our livelihoods depend on the economy. It is an issue that desperately needs to be addressed.

8. Entry into the World Trade Organisation.Probably the biggest legacy of 2013 is the one that few people are aware of - our ongoing effort to become a member of the World Trade Organisation and implement trade pacts such as the European Partnership Agreement.

As Simon Evenett, a professor of economics at the University of St Gallen in Switzerland, put it: "When a country joins the WTO, they have to take on the entire body of WTO rules, plus whatever conditions the existing members demand of them. The applicant really has very little choice, if they want to get into the organisation, whether to accept those conditions. So it's not a negotiation in the traditional sense; it's very much a demand-and-acquiescence process.”

This begs the question: why do these countries want to join? There is some evidence that obtaining the WTO's seal of approval can help small countries attract foreign direct investment, Evenett said. But the biggest payoff of membership comes in the form of the organisation's Most Favoured Nation (MFN) rule. Broadly speaking, the MFN rule dictates that all WTO members have to be granted the same access to one another's markets.

"If Ethiopia joins the WTO, that means Ethiopia has to be treated by the US the same way that the US treats Europe," Evenett said. "And that's not trivial at all. That's an assurance that you will not be picked off by the big guys – in fact, picked off by anybody."

Exactly how this will impact the Bahamian business community is unclear to just about everyone at the moment, except perhaps the handful of technicians who are negotiating in secret on our behalf. In short, any national and domestic policy measures on issues of great concern such as health, food, environment and industrial priorities, can all be reversed by a panel of trade experts deciding if those rules conflict with either the WTO or other free trade agreements.

This opening up of the economy can be expected to have major consequences for the average Bahamian, who is being kept in the dark. Lack of transparency in this, and many other areas, will have a tremendous negative impact on the Bahamas going forward. The greatest legacy of 2013 in this regard was the failure to implement a freedom of information law.